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Mortgage rates have dropped to their lowest point in more than a year, with the average rate on a 30-year fixed mortgage falling to 6.29% on Friday (September 5). This significant decrease follows the release of a weaker-than-expected August jobs report, according to CNBC. The 16 basis point drop is the largest single-day decline since August 2024, marking a notable shift from May when rates peaked above 7%.
The drop in mortgage rates comes as a relief to prospective homebuyers and existing homeowners considering refinancing. For instance, a $450,000 home purchased with a 30-year fixed mortgage at 6.29% would result in a monthly payment of $2,226, compared to $2,395 at a 7% rate, a savings of $169 per month.
The decline in rates has also positively impacted homebuilder stocks, with companies like Lennar, DR Horton, and Pulte seeing approximately 3% increases in their stock prices. However, despite the favorable rates, mortgage demand from homebuyers has not yet shown a significant response. Applications for home purchase mortgages were 6.6% lower than four weeks prior, as reported by the Mortgage Bankers Association.
The weaker jobs report, which showed nonfarm payroll employment of just 22,000 in August, has contributed to the drop in rates. This figure was well below the median estimate of 75,000 new jobs. The Truth About Mortgage noted that the unemployment rate ticked up to 4.3%, and average hourly earnings increased by 0.3% for the month.
Looking ahead, the market remains cautious as upcoming economic data, such as the Producer Price Index (PPI) and Consumer Price Index (CPI) reports, could influence future rate movements. Analysts suggest that mortgage rates might need to reach the 5% range to significantly impact homebuyer activity, as home prices remain high and economic uncertainty persists.